Daniel BurdonDaniel Burdon is APN Australian Regional Media's Canberra bureau reporter, covering federal parliament and politics. He was previously a rural and general news reporter at the Morning Bulletin in Rockhampton and worked in Alice Springs for the Centralian Advocate.

A SMART national health insurance system focused on people with chronic health problems is essential to avoid massive rises in health costs, a report says.

The report out on Monday from Victoria University's Australian Health Policy Collaboration called for reforms to ensure people got the chronic health care they needed without costing too much.

As Health Minister Sussan Ley completes major consultations on the private health insurance industry, the report calls on the government to create a "blended insurance model", focused on preventing chronic health problems, rather than treating them.

The AHPC research looked at health insurance in several countries.

It looked at three models; a taxpayer-funded insurance system, a mandatory private insurance model with industry funding and a private system with "regulated competition".

The third option provided the "foundation components of a universal and sustainable health insurance model designed to provide for chronic health conditions".

AHPC director Rosemary Calder said Australia's current health policies were failing about a quarter of the population.

She said those with preventable diseases and chronic conditions such as diabetes, heart disease and stroke were "growing by the day".

In 2011 the Australian Institute of Health and Welfare found chronic disease was the leading cause of disability, illness and death - accounting for 90% of deaths that year - linked to four key risk factors: smoking, physical inactivity, poor nutrition and harmful alcohol use.